- Operating result for the third quarter isolated amounted to SEK 2,004m, slightly better than the previous quarter and 29 per cent higher than the third quarter of 2002
- Operating result for the first nine months including pension compensation increased by 4 per cent to SEK 5,769m, whereas the result excluding pension compensation rose by 11 per cent, to SEK 5,305m
- Net profit (after tax) increased by 6 per cent to SEK 4,040m for the first nine months
- Total costs, including pension compensation, for the first nine months decreased by 5 per cent
- Credit losses remained low
- Return on equity was 11.8 per cent (11.6) and earnings per share (nine months) SEK 5.82 (5.46).
President's statement
Stable development in the third quarter
The economy has recovered within several areas during the third quarter. Stock markets have continued to rise, and some improvement can be seen in the difficult economies of Japan and Germany. In Sweden, despite the no-vote to the euro, the Swedish krona has strengthened and interest rates remain at a low level.
Within SEB, our "3 C" programme continues to yield results. Costs are continuing to decrease, whereas Customer satisfaction as well as market shares are increasing. When it comes to Cross-servicing our efforts are starting to give results, supporting the increased net interest and net commission income in the third quarter.
During 2003 an internal process of establishing common core values throughout the Group has started. This process aims at strengthening internal co-operation between our different entities in order to further increase customer satisfaction and employee motivation.
In the retail business our market shares continued to rise within several areas, e.g. mortgage loans and mutual funds. SEB has maintained its number one position on the total savings markets in Sweden according to the Swedish "Sparbarometern" as of June 2003.
The third quarter result was strong throughout the Group.
Nordic Retail & Private Banking had its best quarter since early 2000. Corporate & Institutions continued to deliver strong and stable results, in spite of lower activity levels during the summer months. Merchant Banking has attracted new customers among Financial Institutions and won business in new areas, such as Germany and the Baltic countries. Within German Retail & Mortgage Banking further cost reductions are now being implemented in order to improve the increased but still unsatisfactory profitability.
SEB Asset Management is now getting proof that its restructuring is successful. Costs have come down, performance has increased as well as customer ratings. SEB Trygg Liv focuses on unit-linked insurance, where sales have risen by 26 per cent, and also shows a significantly improved result. The SEB Baltic & Poland division continues to deliver high profits.
Our strengthened market positions and increased business volumes provide a good basis for taking advantage of an upturn in the economy.
The Group
Third quarter isolated
Improved result
Operating result for the third quarter amounted to SEK 2,004m, including pension compensation, slightly better than for the previous quarter and 29 per cent higher than the corresponding period of 2002.
Net profit after tax amounted to SEK 1,397m, virtually the same as in the second quarter and 27 per cent better than the corresponding quarter of 2002.
Total income, SEK 6,698m, was in line with the second quarter and 5 per cent higher than in the corresponding quarter of last year. The rate cuts by the ECB and the Swedish Riksbank, respectively, had full negative impact on net interest income from household transaction accounts, which was more than offset by increased lending and deposit volumes.
Strengthened stock markets had a positive impact on equity-related commission income, which constitutes approximately 35 per cent of the Group's net commission income. These effects were mainly seen within Nordic Retail & Private Banking, SEB Asset Management and SEB Trygg Liv. Net commission income increased by 4 per cent between the second and third quarter.
Total costs including pension compensation, SEK 4,455m, were slightly lower than last quarter and down by 4 per cent compared to last year.
Net credit losses amounted to SEK 273m (181 in the third quarter of 2002).
Result for nine months
Operating result: SEK 5.8bn
Operating result
for the first nine months of 2003 including pension compensation amounted to SEK 5,769m, an increase of 4 per cent compared with last year. The result excluding pension compensation rose by 11 per cent to SEK 5,305m. The largest contributor was Corporate & Institutions, whereas SEB Baltic & Poland showed the strongest increase.
Net profit after tax amounted to SEK 4,040m (3,827).
Stable operating income
Total income decreased by 2 per cent, to SEK 19,958m (20,449).
Net interest income
rose by 1 per cent to SEK 10,284m (10,176). Increased volumes, leading to higher market shares within both mortgage and other lending, had positive effects. These were, however, to a large part offset by reduced deposit margins due the lower interest rate levels. Net commission income
amounted to SEK 7,500m (7,516). The positive stock market development in the last two quarters of 2003 has only during the past months led to increased customer activity in terms of brokerage and equity fund sales. There have still not been any IPOs in the Swedish market this year. Net result of financial transactions
amounted to SEK 1,444m (1,755). The lower activity levels during the summer months and uncertainty prior to the euro referendum had a negative impact, whereas September overall showed strong improvements. Other income
decreased to SEK 730m (1,002), mainly due to lower capital gains compared to the corresponding period in 2002. Reduced costs
Total costs including pension compensation decreased by 5 per cent to SEK 13,488m (14,258). Excluding pension compensation costs were reduced by 7 per cent to SEK 13,952m.
Staff
costs, gross, were down 3 per cent to SEK 8,340m (8,564) due to staff reductions and lower performance-related compensation. The average number of full time equivalents in September 2003 was 17,907, a decrease of approximately 2,100 since June 2001, which was the basis for SEB's cost reduction programme. Compensation from pension funds was reduced to SEK 464m (759). On 30 September 2003, total assets in SEB's pension funds amounted to SEK 12.9bn, while commitments were SEK 10.6bn. Accordingly the excess value was SEK 2.3bn, unchanged from last quarter.
Other operating costs
were reduced by 12 per cent to SEK 4,530m (5,145). External costs for IT amounted to SEK 1,158m (1,311). Total IT-costs (defined as a calculated cost for all IT-related activities including costs for own personnel) amounted to SEK 2.6bn (2.6). In order to reduce costs further SEB's two IT companies have been co-ordinated as from October 2003. New accounting principles for pension-related costs - negative effect on 2004 profit before tax by SEK 300m
The introduction of new accounting principles, RR 29 (IAS 19), in Sweden from 2004 will have an impact on pension costs in group accounts. SEB's analyses indicate that the Group's excess value, as of January 2004, according to the new rules will be around SEK 1.5bn. The change is expected to affect profit before tax for 2004 negatively by approximately SEK 300m compared to the current accounting principles. The new principles will increase equity by about SEK 1.2bn.
Credit losses on a low level
The Group's net credit losses, including changes in the value of assets taken over, remained at a low level, 0.13 per cent (0.11), in spite of an increase to SEK 676m (550). The increase is mainly explained by lower recoveries than last year and a build-up of reserves in Germany. Asset quality remained stable.
Improved result from insurance operations
SEB Trygg Liv's operating result increased to SEK 85m (39), which is included in the Group's result. The result of the SEB Group's total insurance operations, non-life and life including goodwill amortisation of SEK 110m (110), amounted to SEK 9m (-66).
SEB Trygg Liv's result from on-going business (including change in surplus values but excluding financial effects of short-term market fluctuations) was SEK 1,360m (1,146).
Results including surplus value changes are not consolidated with the SEB Group's result. In order to provide a complete overview of the Group's operations, SEB Trygg Liv is reported separately, including changes in surplus values, in "Additional information" on www.seb.net.
Increased assets under management
On 30 September 2003, the SEB Group's assets under management totalled SEK 800bn (742 at year-end 2002). Net inflow during the first nine months of 2003 was SEK 32bn, while change in value was SEK 26bn. SEK 10bn of the net inflow emanated from Sweden, SEK 14bn from Germany, SEK 4bn from the rest of the Nordic countries, and SEK 4bn from the Baltic States and Poland.
Net sales of funds have tripled during January-September 2003 compared to last year.
Credit portfolio
Total credit exposure, including contingent liabilities and derivatives contracts, amounted to SEK 965 billion (1,000), of which loans and leasing, excluding repos, accounted for SEK 728 billion (731).
Since year-end 2002 the risk-weighted assets for credit risk have increased by 2.3 per cent to SEK 473 billion.
Growth in the credit portfolio was related to the Baltic subsidiary banks and to Swedish household mortgage lending, as in previous quarters. Contributing factors behind the decline in the total credit volumes during the third quarter were both fluctuating banking sector volumes as well as the strong Swedish krona development against the U.S. dollar and the euro.
The geographical distribution of the credit portfolio remained stable with credit volumes concentrated on our home markets, the Nordic area (46 per cent), Germany (34 per cent) and the Baltic countries (4 per cent).
On 30 September, doubtful loans, gross, amounted to SEK 10,443m (11,002 at year-end 2002), of which SEK 8,893m (8,862) were non-performing loans (loans where interest and amortisation are not paid) and SEK 1,550m (2,140) were performing loans. The reserve ratio for doubtful loans was 69 per cent, in line with the previous quarter (67). The volume of assets taken over amounted to SEK 128m (130).
Capital base and capital adequacy
The capital base for the financial group of undertakings (i.e. excluding the insurance companies) amounted to SEK 53.6bn as of 30 September 2003 (52.7 at year-end). Core capital was SEK 41.6bn (39.7), of which SEK 1.8bn constituted so-called core capital contribution. Risk-weighted assets amounted to SEK 514bn (503). The increase in risk-weighted assets was due to business volume increases in general.
As of 30 September 2003, the core capital ratio was 8.1 per cent (7.9) and the total capital ratio 10.4 per cent (10.5), including the result for the third quarter of 2003.
In September, the rating institute Standard & Poor's changed its outlook on SEB's rating from Stable to Positive.
Changes in SEB's Group Executive Committee
Nils-Fredrik Nyblaeus, at present Deputy President and Chief Financial Officer of FöreningsSparbanken, has been employed by SEB as Executive Vice President with responsibility for Group Staff as well as IT and successively other functions. He will join SEB and the Group Executive Committee by April 2004 and succeeds Lars Gustafsson, who will retire.
In order to further explore synergies in the retail areas in Germany and Sweden, Fleming Carlborg, Head of the Nordic Retail & Private Banking division, has been made responsible within the Group Executive Committee for the Retail operations in both the Nordic area and Germany.
Stockholm, 22 October 2003
Lars H Thunell
President and Group Chief Executive
This Interim Report has not been reviewed by the Auditors of the Bank.
More detailed information is presented on
www.seb.net. The "Additional information" includes: Appendix 1 SEB Trygg Liv
Appendix 2 Credit exposure
Appendix 3 Capital base
Appendix 4 Market risk
Profit & Loss Account quarterly performance seven quarters
- The SEB Group
- The Divisions and business areas
- Revenue split
Financial information in 2004:
13 February Annual Accounts for 2003
1 April Annual General Meeting
6 May Interim Report January-March
27 July Interim Report January-June
20 October Interim Report January-September
Further information is available from:
Gunilla Wikman, Head of Group Communications,
+ 46 8 763 81 25; +46 70 763 81 25
Per Anders Fasth, Head of Group Investor Relations,
+ 46 8 763 95 66; +46 70 573 45 50
Annika Halldin, Responsible for financial information,
+46 8 763 85 60; +46 70 379 00 60
The full report including tables can be downloaded from the link below